The interest rate is determined by the supply and demand of loanable funds.

Question

Quizplus · Accepted Answer

The interest rate is determined by the interaction of the supply and demand of loanable funds in the loan market. When there is a greater demand for loans than the available loanable funds, the interest rate tends to rise. Conversely, when there is an excess supply of loanable funds, the interest rate tends to fall. Therefore, as the supply and demand of loanable funds change, it affects the equilibrium interest rate of the market.

The Interest Rate Is Determined by the Supply and Demand